New debt plan targets favored tax deductions

A new bipartisan plan to reduce government borrowing would target some of the most cherished tax breaks enjoyed by millions of families — those promoting health insurance, home ownership, charitable giving and retirement savings — in exchange for lowering overall tax rates for everyone.

Many taxpayers would face higher taxes — a total of at least $1.2 trillion over the next decade, and perhaps more.

The details and impact of the plan, released this week by the bipartisan “Gang of Six” senators, emerged as President Barack Obama called congressional leaders to the White House on Wednesday to determine, in separate meetings, their bottom line for extending the nation’s debt limit while also cutting spending at the greatest amount possible. The role of additional tax revenue remained a sticking point.

With the default deadline of Aug. 2 approaching, the White House signaled for the first time that Obama would be willing to sign off on a short-term extension of the debt limit if a grander deal were in the works and needed only a few days’ worth of extra time to wind its way through the legislative process.

For its part, the Gang of Six plan punts on many of the most difficult issues, leaving it to congressional committees to fill in the details later. But supporters say it provides a framework to simplify the tax code, making it easier for businesses and individuals to comply while eliminating incentives to game the system.

“I think this is an attempt to find a middle ground on taxes that emphasizes keeping rates low and broadening the base as much as possible, and I think that’s a very positive aspect of it,” said Eugene Steuerle, a former Treasury official who worked on the last tax reform package that passed Congress, in 1986.

Coupled with spending cuts, the plan would reduce deficits by nearly $4 trillion over the next decade. While Obama and senators from both parties lauded the plan as a possible breakthrough in their negotiations, some congressional leaders said the plan lacks details and could produce much bigger tax increases than advertised.

The Republican staff of the House Budget Committee issued a critique saying the revenue increase could exceed $2 trillion over the next decade, when compared with current tax policy.

“A tax increase is the wrong policy to pursue with so many Americans out of work,” said House Majority Leader Eric Cantor, R-Va.

The plan would simplify the tax code by reducing the number of tax brackets from six to three, lowering the top rate from 35 percent to somewhere between 23 percent and 29 percent. That could provide a windfall for wealthy taxpayers because the 35 percent tax bracket currently applies to taxable income above $379,150.

To help pay for lower rates, the plan would reduce popular tax breaks for mortgage interest, health insurance, charitable giving and retirement savings. Other tax breaks would be spared, including the $1,000-per-child tax credit and the earned income tax credit, which helps the working poor stay out of poverty.

The alternative minimum tax, which was enacted in 1969 to make sure that high-income families pay at least some income tax, would be repealed. The tax was never indexed for inflation, so Congress routinely patches it each year — at an annual cost of about $70 billion — to prevent it from hitting more than 20 million middle-income families.

About 35 million households claimed the mortgage interest deduction in 2009, and about 36 million households claimed deductions for charitable contributions, according to the Joint Committee on Taxation, the congressional scorekeeper on taxes.

The Gang of Six plan does not specify how the tax breaks would be trimmed. Democrats have several proposals that would restrict wealthy families’ use of the breaks, while preserving them for most low- and middle-income taxpayers. Such a plan would offset rate cuts for high-income families by limiting their ability to take advantage of various tax breaks.

For example, current law allows homeowners to deduct the interest they pay on home mortgages of up to $1 million. One proposal would lower the limit to $500,000 and exclude mortgage interest on second homes.

Starting in 2018, the new health care law would tax high-priced health insurance plans. There are several proposals to adjust the tax to include more health plans while sparing lower-income families with more modest coverage.

The Gang of Six plan is silent about taxes on capital gains and dividends, but tax experts said it would be difficult to generate more than $1 trillion in additional revenue without increasing taxes on investments. The current top rate on capital gains and dividends is 15 percent — well below the top rate for ordinary income.

“No matter what they do on the revenue side, by some measure they are going to be taking something away from somebody,” Steuerle said. “The whole budget package is about asking a lot of people to give up something they think they have.”

On the business side, the plan would lower the corporate income tax rate from 35 percent to somewhere between 23 percent and 29 percent, all of which would be funded by eliminating unspecified tax breaks for businesses.

Under current law, the U.S. taxes overseas profits of American corporations but only after they return those profits to the U.S. The proposal calls for a territorial tax system, which would tax only profits made in the U.S. The proposal could be a huge windfall for U.S.-based multinational corporations, though it would supposedly be financed by eliminating many of the tax breaks those same companies enjoy.

Business groups have already been lobbying Congress to keep their tax breaks and to create new ones, an effort that will only intensify if lawmakers dive into the details of overhauling the tax code.

“The bookshelves of policy analysts in Washington are loaded with statements of principle on tax reform that all sound good,” said William Gale, an adviser to President George H. W. Bush’s Council of Economic Advisers and now co-director of the Tax Policy Center. “And then they all die when you try to specify the details.”

The Gang of Six senators is made up of Republicans Tom Coburn of Oklahoma, Mike Crapo of Idaho and Saxby Chambliss of Georgia and Democrats Kent Conrad of North Dakota, Mark Warner of Virginia and Dick Durbin of Illinois.

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Same old, same old. SS,DD. The rich get richer, while the poor get poverty. I’m almost as sick of this crap as I am of the Stacey Dugard garbage, and HLN played her BS for two solid WEEKS, ferchrissake! Enough already. Geterdone.

“A recent study shows that over 70 percent of Americans derive their monthly income from an actual W-2 job. In other words, working is the prime mover and source of their income. Yet the financial elite have very little understanding of this concept. Why? 42 percent of financial wealth is controlled by the top 1 percent. We would need to go back to the Great Depression to see such lopsided data.”

You are wrong about the Chinese financial miracle that’s currently in progress. The USS America is slipping below the waves, stern up, listing to port with the ‘fat lady’ in queue to sing “America the (once) Beautiful” just prior to it slipping below the waves of failed empires past, Europe too.

I’ll supply a link to a free edition of Larry Edelson’s “Real Wealth Report” to which I subscribe. It’s by subscription only, but he recently posted a web article that offered the link to his July issue, no password required. It’s associated with the Weiss Rearch family of financial publications. I have no vested interest in the firm other than subscribing to their various newsletters over tiime and I highly recommend others the same.. You’ll never regret doing so in these tumultuous financial times.

This .pdf will give you and other readers a rundown on what the ‘other half are doing’ while our leaders jive and shuck us into abject national poverty.

Btw, the average wage in China is 89 cents per hour, but is higher in other cities and provinces. They now have millions of new “middle class” and above citizens who are consuming luxury staples like there’s no tomorrow.

The smart money says “Go West young man…go West” in this case as far West as possible until you reach what is known as the Far East; I.E. ‘Chindia and Malaysia”. Japan and Korea including the Anglo nations of Australia and New Zealand are not out of the running either. U.S. citizens and investment advisers are living in lala land for sure. / : |

The only admonition concerning these Asian governments is to stay apolitical and focus on the business of business and you’ll be fine.
In this country you have a thousand plus factions milling about demanding anything and everything from our now failing government; I.E., too much ‘white noise insanity’ as far I’m concerned.

One other thing Almandine you made reference to the “American Thinker” article. I read it, but what isn’t mentioned is that the bulk of these successful American households with two of everything are in serious debt; ie., homes, retail goods, autos etc. The average CC debt load is approaching $9,000. Chinese on the other hand generally put 50% down on a home or in many cases pay cash. They do the same for other consumer items too.

Our seeming national ‘success’ is a “Potemkin Village” phenomenon. In a financial sense, we’ve truly become the “paper tigers” we were once accused by the Red Chinese during the “Cold War” era.

Like in any nation, they still have a bunch of the lower classes milling about on the rice paddys, heating their homes and cooking with pig f*rt gas (methane) and living the the life of a China gone by, but China is headed to become the world’s superpower within twenty years or less, like it or not…period!

I just thought I’d clarify something Almandine. Some time back I mentioned that I write for impact. So my initial comparative thesis was that of the Chinese model to something closer to home; I.E., Nebraska’s unicameral system of government which would surely work and simplify government while keeping our representatives on a shorter leash so to speak.

Obviously the “Red Chinese:” model wouldn’t be palatable to our people, but surely Nebraska’s model would work. If I recall Benjamin Franklin was against the idea of having Senate since he evidently could see who’s interests they would serve over that of the general population and it surely has come true in our times. The Constitution was designed to provide checks and balances. Unfortunately over the past 235 years especially since WWII and now closer to our times these balances seemingly are evaporating before our eyes, moving this nation to a fascist form of government.

Our political party system has devolved in a duopoly, both reporting to the same shadowy, monied interests with the needs of the general populace, second to last on their agenda.

We’re captive to a foul, failing system of government. There’s simply no reason for this endless partisan bickering concerning the budget or lack thereof. If these partisans cared about our nation, they’d simply realize enough is enough and sit down to hammer out a deal to save the nation rather than boosting their respective public image for the upcoming 2012 elections. As mentioned they are duopolists and both line their pockets at the expense of the greater public they are tasked to represent, but so too each has their own corrupt agenda driving this nation off a cliff to oblivion.

We have madmen and women at the helm of the USS America steaming at flank speed into a known iceberg field with 320 million ‘captive’ passengers at their mercy. They seemingly won’t stop until they’ve destroyed this nation.

If we survive this round of engineered indecision, then it will reoccur at some point in the future, only it will be lights out for the America. We simply cannot continue along this path of failed representation relative to “We the People’s” needs.

It’s fascinating that they are conducting the business of government as if they were ‘terrorists’ rather than representatives of the people, all of them sworn to protect and defend the Constitution and our way of life against all enemies both foreign and domestic.

Seemingly they are not friends of the people. We’ve met the enemy and he is them…! : |

Having liars tell you that you are free while creating an evermore powerful police state doesn’t cut it Bryan and that’s precisely what these power hungry mattoids are doing and they’ll assuredly have everyone working for nothing too in time on their plantation once known as the United States of America, ” land of the free and home of the brave”…NOT! / : |

Maybe with large contentious populations such as ours, a benign dictatorship is best. The Chinese are still a communist dicatatorship, but interestingly they don’t cripple their people with a host of taxes and superfluous laws. Seemingly they’ve moved from brutal, hardcore communism to a modern hybrid that is friendly to the acquisition of capital. . It’s truly a mammoth problem managing 1.5 billion citizens and now us with 320 million almost ten times the population of the 1870’s it seems we’re failing.

China is sitting on a 3.2 trillion USD dollar surplus, now with 1.6 millionaires surpassing that of the U.S. and their number of billionaires is coming on like gangbusters soon to equal or exceed that of the U.S.

Even billionaires and high level businessmen; ie., crooks get executed in China for their crimes against the people whereas not so here. Jurisprudence in this nation has turned into one big ‘Case Anthony’ styled circus at all levels, different circumstances, but just the same a case of “justice delayed is justice denied” and most cases it’s justice scorned in this nation.

I know my recommendation may be shocking, but considering the hazards we are now facing it almost seems that it would take a state of martial law to turn it about and no my recommendation isn’t keyed to the likes of Obama & Co. being the dictator. We could have a system where the people elect the dictator to hold a single four year term, no multiple parties or lobbying entities allowed.

The aforementioned is extreme to be sure.

A more Western friendly version would be for us to adopt a unicameral system of government; I.E., a single house that passes laws in a more effective fashion. Nebraska, Guam and the Virgin Islands have such with Nebraska the only state having such within the U.S.

“Nebraska is the only state in the United States with a unicameral legislature. Although this house is officially known simply as the “Legislature”, and more commonly called the “Unicameral”, its members call themselves “senators”. Nebraska’s Legislature is also the only state legislature in the United States that is nonpartisan. The senators are elected with no party affiliation next to their names on the ballot, and the speaker and committee chairs are chosen at large, so that members of any party can be chosen for these positions. The Nebraska Legislature can also override a governor’s veto with a three-fifths majority, in contrast to the two-thirds majority required in some other states” …extract from Wiki link article

Instead of having multiple, devisive parties pulling in all different directions in order to serve special interests, there would simply one; I.E., “We the people’s” party. The House of Representative is supposed to be the people’s house whereas the Senate has become a gentlemen’s club of millionaires who’s main commitment is to serve the needs of the monied class and their corporate interests. House reps being ‘po boys and gals’ relatively speaking are easily ‘bought off’ once they hit D.C. and the Senators already rolling in bucks enjoy their multi-term incumbency as simply something to occupy themselves and to sate their thirst for the heady nectar of power and as we all know “nothing corrupts as absolutely as absolute power” …Lord Acton, British historian

You asked Almandine and I have answered although you may not care for my suggestions. My first was extreme with the second more in tune with Western ‘values’ whatever that means in these times of globalism run amok.

“There’s TV to watch and beer to drink.
Who wants to worry about all of that boring government stuff, it don’t affect us none anyways.
…Of course I meant this in sarcasm.
The irony here is, I’m sure there are millions who think this very thing every day.” …extract from post

Yes, it’s true eve, but what’s the alternative for most Americans? They are captive to the faux ritual of the ballot box which simply indemnifies the pre-chosen candidates that were deemed functional via the shadowy, deep pocket entities that own this nation lock stock and barrel who use their MSM outlets to present whatever the current gaggle of candidates might be to the unwashed masses, surely to their advantage and our collective detriment. The more things seemingly change, the more they remain the same…no? / : |

It’s my belief that our very system of government has failed us and needs to be replaced. The one we have is out of control and totally unresponsive to the needs of the people and the health of a nation which is now on a “death watch” as far as I’m concerned, setting aside the current budget debacle.

Our system worked fine from its founding through the 19th and early 20th centuries, but has demonstrated ever increasing weaknesses post WWII in terms of “We the people” having a reponsive and responsible government. Partisan politics along with all its derivative negatives and endemic corruption is virtually devouring this nation alive…!

Additionally, this linked article has just hit the WWW, and I think it speaks volumes about the “plight”of our situation. Ostensibly, one might argue in rebuttal to “a failed nation argument”, that – except for the debt – the notion of a country in dire straights is a manufactured strawman.

Net interest attributable to past debt-financed defense outlays 126.3 Total 1,027.5 (in excess of one trillion per annum as of 2009)

Source: Author’s classifications and calculations; basic data from U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2011 and U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970.

***

It it were only the the $640-50 billion they claim to spend per annum, but its far more when we add in all the other functions linked to both present and past military functions, retirees and a host of other blood-sucking programs that need a major ‘haircut’ both past, present and into the future. Although not the focus of my rant, civilian government employees from the Executive down the lowest level janitor needs some trimming too…bigtime! : |

Hi Sandra, isn’t it amazing the outright arrogance of today’s brand of public servant ?
They offer a tepid cup of tea and a bagel laden with bull to we the people, while merrily courting the favor of the architects that created this fiscal mayhem by offering up champagne parachutes and soft landing zones.
My angst meter is red-lined, my give two squirts reservoir is dry, and I’m down to cracking the last bones of my long since devoured oxen while sticking pencils in my ears to quiet the insane din of these fools telling me I’m living the American dream.
I have reached the outer limits of my inner sanctum to find,
it never belonged to me, at any time. Hack..

Hither and yon they go, tearing at and re-routing the same old plumbing.
Feigning installing new, and secure in their belief that it matters not when we notice too late,
that the same crap is still spewing from the outlet.